American Apparel net sales up in 2008

17 Mar '09

6 min read

Operating expenses for the year ended December 31, 2008 increased to 48.3% of net sales, versus 47.6% for the year ended December 31, 2007. Operating expenses increased due to higher payroll, rent and occupancy expense related to the growth in the number of retail stores from 182 as of December 31, 2007 to 260 as of December 31, 2008.

Pre-opening expenses for retail stores were $10.3 million for the year ended December 31, 2008 versus $5.3 million for the year ended December 31, 2007. Operating expenses were also higher due to an increase in corporate expense of approximately $7.5 million, related primarily to an increase in accounting and professional fees as a result of American Apparel operating as a public company in 2008.

Operating income for the year ended December 31, 2008 was $36.1 million, versus $31.1 million for the year ended December 31, 2007. Operating margin for the year ended December 31, 2008 was 6.6%, versus 8.0% for the year ended December 31, 2007. The operating margin for 2008 includes the 240 basis point reduction in margin from the stock based compensation expense.

Interest expense for the year ended December 31, 2008 decreased to $13.9 million from $17.5 million in for the year ended December 31, 2007. The decrease in interest expense was due to a decrease in the LIBOR rate on which the company's floating rate debt is based, and lower average balances under the company's various credit facilities over the course of the year.

The company's effective tax rate for the year ended December 31, 2008 was 34.0%.

Net income for the full year ended December 31, 2008 was $14.1 million ($22.9 million adjusted for the merger related stock based compensation expense), versus $15.5 million in 2007. Diluted earnings per share for 2008 was $0.20 ($0.33 adjusted for the merger related stock based compensation expense), versus diluted earnings per share of $0.31 in 2007.

Dov Charney, Chairman and Chief Executive Officer, stated: "2008 marked a year of great accomplishments for American Apparel. In addition to opening very promising stores in a large number of new markets, we were very pleased to have achieved the EPS and EBITDA guidance that we outlined as targets a year ago. Now with key parts of our management team starting to take shape, our capital structure resolved, and a sophisticated financial partner at our side in Lion Capital, I strongly believe that our company is better positioned than at any time in its history to succeed and deliver on the great potential of the American Apparel brand."

For 2009, to date the company has opened five new store locations and has 9 more locations under signed leases which are currently in development. For the year, the company currently expects it will open a total of 25 to 30 new stores.

The company expects consolidated net sales for 2009 in the range of $575 to $600 million, and income from operations in the range of $55 to $65 million. The company expects depreciation and amortization for the year of approximately $25 million.

American Apparel Inc

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